Week in Review

Oil impulse dominates market pricing. WTI crude posted its largest weekly gain of the period, driven by Middle East tensions that reversed earlier inventory relief. This move lifted Treasury yields and pushed shorter-dated notes higher. Equity indices posted mixed closes with limited net participation.

Labor data signal incremental cooling. ADP Employment Change missed expectations and declined from the prior print, aligning with the rise in the unemployment rate. Weekly jobless claims and Chicago Fed National Activity Index releases provided further evidence of moderating private payroll growth without outright contraction.

Housing and sentiment indicators remain resilient. Mortgage rates moved higher while consumer sentiment supported retail sales growth. New home sales are expected to rebound in the coming release. The through-line is that above-target inflation reinforced by energy prices continues to shape rate paths, with OIS curves showing only limited near-term repricing after the data flow.

Fed Watch

Federal Reserve speakers reiterated data dependence with no shift in the funds rate. Minutes and Governor remarks upheld the path priced for the first cut no earlier than mid-2027. The CPI and unemployment prints reinforced the hold stance amid the oil impulse. OIS curves remained anchored with only limited near-term repricing after the ADP miss and inventory builds. Forward guidance continued to emphasize activity resilience absorbing higher borrowing costs. This week's data flow supports the medium-term rate path staying on hold as energy prices re-anchor inflation expectations. No FOMC decision occurred during the period.

Data Review

ADP Employment Change missed expectations and declined from the prior print, pointing to slower private payroll momentum consistent with the rise in the unemployment rate. API crude stocks surprised with a build against a draw consensus, followed by EIA reporting a crude inventory increase. Mortgage rates rose. These releases occurred against a backdrop of above-target CPI and moderate GDP growth. The data indicate the economy remains in mid-expansion, absorbing higher borrowing costs without immediate contraction signals. Pipeline disinflation through wholesale prices and labor softening together support the view that the Fed will stay data-dependent. Oil-driven input cost pressures now offset earlier core cooling, keeping the medium-term rate path on hold. Inventory builds eased immediate supply tightness yet reinforced the commodity channel tightening financial conditions.

The Week Ahead

Monday brings Durable Goods Orders alongside the Dallas Fed Manufacturing Index. Tuesday features ADP Employment Change, Goods Trade Balance, S&P/Case-Shiller Home Prices, and Consumer Confidence. Wednesday includes the MBA 30-year mortgage rate and EIA inventory updates. Thursday and Friday will see further housing and labor indicators. These releases will test whether labor cooling and housing resilience persist against the GDP backdrop. Central bank speakers remain limited. Markets will monitor deviations that could shift 2-year yield pricing. The data slate will inform views on whether the oil surge sustains above-target inflation pressures into the following period.

Risks & Themes

The oil surge shifts the outlook toward tighter financial conditions through the commodity channel rather than outright growth contraction. Upside scenario centers on continued US activity resilience supporting equities while downside risks arise if inventory builds fail to ease price pressures. Market mispricing signals appear in the limited OIS repricing despite the crude gain. Volatility remains elevated in energy and yields. Positioning shows defensive flows into gold. Flow considerations favor duration extension only after confirmation of labor softening beyond the latest ADP print.

Cross-Asset

The S&P 500 closed the week with a modest net decline after trading in a narrow range. Nasdaq 100 declined on the final day while the Dow Jones rose. Ten-year Treasury yields climbed from earlier in the week, with the 2-year note also moving higher. USD/JPY held near the prior close after moving from lower levels. EUR/USD eased. WTI crude ended at 89.31 after spiking higher, a 7.31% weekly gain. Gold advanced. Bitcoin closed lower. The oil surge on geopolitical tensions drove the rates and commodity moves while equities showed limited net participation.

Global Context

Brent strength lifted German 10-year Bund yields while the ECB deposit rate stayed on hold. Chinese Q2 GDP weakness persisted alongside export strength that widened the trade surplus. Canadian unemployment data confirmed labor resilience supporting a Bank of Canada hold. UK BRC Retail Sales extended the slowdown with gilt yields rising. These cross-border spillovers reinforce data dependence across developed markets and keep the dollar channel active.

Week in Review

ZEW beat resets sentiment baseline. German ZEW jumped against consensus, driven by improved industrial expectations after reform signals. This print reversed the prior reading and lifted equity indices mid-week. PMI expansion broadens the recovery. Eurozone flash composite PMI reached expansion territory, with German manufacturing and services both above prior levels and confirming the bloc has moved back into expansion. French readings also improved, narrowing the north-south divergence. Inflation and labor data anchor policy. Eurozone CPI held steady year-over-year while unemployment remained unchanged, giving the ECB limited room to ease. German PPI eased further to 1.8% year-over-year from 2.2%, extending pipeline disinflation. Oil surge overrides softer prints. Brent’s 8.47% advance to 96.78 dominated cross-asset pricing and pushed German 10-year Bund yields higher despite the ZEW beat. Markets closed the week with Euro Stoxx 50 at 6280.94, up 0.86% net. The through-line is selective resilience in sentiment and activity data offset by the energy price impulse that keeps financial conditions tighter than the soft inflation prints alone would imply.

ECB Watch

No ECB speakers appeared during the week, leaving forward guidance unchanged. The deposit rate remained unchanged with OIS curves showing the first cut still discounted no earlier than mid-2027. Eurozone CPI held steady year-over-year and unemployment remained unchanged, reinforcing the data-dependent stance. German PPI at 1.8% year-over-year and the ZEW surge together suggest pipeline pressures are easing even as growth expectations improve. Markets therefore continue to price steady policy through year-end. The medium-term rate path stays anchored to incoming inflation and activity prints rather than any shift in rhetoric. Oil-driven inflation risks now dominate the balance of risks for the Governing Council.

Data Review

German producer prices printed at 1.8% year-over-year, below the prior 2.2% and confirming continued factory-gate cooling. German ZEW Economic Sentiment Index beat sharply, the largest positive surprise of the week. Dutch consumer confidence improved from the prior reading, a modest stabilization. Eurozone flash composite PMI reached expansion territory, above the 50 threshold and signaling expansion after earlier soft spots. German manufacturing PMI and services both rose above prior readings. French business confidence held steady while German GfK consumer confidence edged higher. These prints collectively point to a mid-expansion phase where domestic demand is absorbing higher borrowing costs, yet the inflation rate and unemployment rate keep the ECB on a data-dependent path with the deposit rate unchanged. The data flow supports a gradual normalization rather than near-term cuts.

The Week Ahead

Monday brings German Ifo Business Climate, expected higher versus prior, a key gauge of business optimism. Tuesday features French consumer confidence and Spanish headline unemployment rate. Wednesday includes French unemployment benefit claims. Thursday delivers preliminary GDP prints for France, Spain, and Germany. These releases will test whether the ZEW and PMI rebound translates into hard activity data. Central bank speakers are light, keeping focus on the growth prints. Markets will watch for any divergence between German and French GDP that could highlight uneven momentum. The data flow arrives against still-elevated Brent levels near 96.78.

Risks & Themes

The oil surge to 96.78 shifts the inflation outlook higher and keeps the ECB on hold longer than earlier priced. Upside scenario centers on further ZEW-style sentiment beats feeding into stronger Q3 GDP. Downside scenario sees Brent remaining elevated and pushing core inflation back above target. Market mispricing appears in OIS curves that still discount only limited near-term easing despite the energy impulse. Positioning shows modest long euro exposure after the EUR/USD decline. Volatility remains contained but could rise on any surprise in Thursday GDP flashes. Flows into Bunds accelerated mid-week on the yield dip before reversing on commodity strength.

Cross-Asset

Euro Stoxx 50 rose 0.86% to 6280.94 on the week while DAX gained 1.02% to 25099.0 and CAC 40 advanced 0.39% to 8372.28. German 10-year Bund yields moved lower mid-week on safe-haven flows after the ZEW beat before closing the period higher on Brent strength. EUR/USD declined 0.46% to 1.14 while EUR/GBP rose 0.47% to 0.85 and EUR/JPY gained 0.42% to 186.49. Gold climbed 1.51% to 4070.8 as a hedge against geopolitical risks. Brent crude surged 8.47% to 96.78, the dominant driver of tighter financial conditions. The configuration shows equities resilient to the energy impulse while curves and the euro priced higher-for-longer policy.

Global Context

Brent’s 8.47% weekly gain to 96.78 echoed the prior week’s advance and re-anchored DM financial conditions tighter. US activity resilience continued to support the dollar, contributing to EUR/USD’s decline. China’s earlier Q2 GDP miss and persistent domestic demand weakness limited any relief in euro-area export orders. Geopolitical risks around Middle East supply added to the energy price impulse over the last seven days. These cross-border factors reinforce the data-dependent stance at the ECB.

Week in Review

Yen Depreciation Accelerates Markets saw USD/JPY move higher amid fiscal blueprint concerns. The 2-year JGB yield rose while the 10-year yield moved higher.

Trade Data Underscores External Pressure June trade balance missed consensus by a wide margin and reflected higher import costs tied to Brent crude advances. Exports beat expectations, rising year-over-year against a lower forecast.

Equity Markets Show Volatility Nikkei 225 declined early in the week before recovering, closing the period at 64611.15 for a weekly decline. Foreign selling of cyclicals intensified after the cabinet’s economic framework highlighted defense spending targets.

Oil Impulse Transmits Directly Brent crude advanced before easing to 96.78, widening the current-account deficit despite the export gain. This configuration reinforced imported inflation risks.

Policy Signals Remain Mixed The cabinet inserted explicit language on Bank of Japan independence yet left medium-term fiscal pressures intact, keeping 10-year JGB yields elevated. No senior Bank of Japan speakers appeared, leaving OIS curves anchored ahead of the next meeting.

Data Dependence Reinforced The combination of stronger exports and sharply wider trade deficits left growth and inflation signals divergent, with markets pricing limited near-term policy adjustment.

BoJ Watch

The Bank of Japan held its short-term policy rate through the week with no decision scheduled. Cabinet approval of the annual policy framework explicitly affirmed operational independence while hinting at higher defense targets that could sustain fiscal pressure on yields. Hawkish comments on faster normalization failed to arrest yen selling, leaving USD/JPY above prior levels. Markets interpreted the June trade miss and Brent surge as reinforcing the case for earlier tightening at upcoming decisions, though OIS curves showed only modest repricing for the next meeting. The policy rate remains the anchor, with data dependence now centered on whether core inflation sustains above prior levels.

The Week Ahead

Monday brings the final Coincident Index and Leading Economic Index readings that will clarify second-half momentum ahead of the next Bank of Japan meeting. Tuesday features the Consumer Confidence Index alongside the Headline Unemployment Rate. Wednesday’s Industrial Production Month-over-Month preliminary print and Retail Sales Year-over-Year will test whether domestic demand absorbs higher borrowing costs. Thursday delivers the Bank of Japan Interest Rate Decision, widely expected to hold, together with the Quarterly Outlook Report that will update growth and inflation projections for coming quarters. Friday’s Housing Starts Year-over-Year release will round out the flow. These prints matter because any sustained strength in retail sales or industrial output could lift terminal-rate expectations, while a soft confidence reading would keep the first adjustment priced later. Markets will also monitor Ministry of Finance comments on currency levels after USD/JPY held near current levels.

Risks & Themes

The oil surge transmitted directly into record imports and widened the trade deficit, shifting the growth-inflation mix toward tighter financial conditions. Upside scenario centers on export resilience year-over-year supporting earlier normalization, while downside risks stem from further yen depreciation prompting intervention that could destabilize OIS pricing. Markets appear to underprice fiscal expansion effects on 10-year JGB yields. Sustained Brent strength would likely keep the Bank of Japan data-dependent and limit near-term easing expectations across the curve.

Week in Review

Inflation trends moderating June CPI eased from the prior reading and missed consensus, while the month-over-month print declined. Lower gasoline prices drove the deceleration and reinforced the view that domestic price pressures are moderating without broad-based weakness.

Growth data and consumer resilience Retail sales prints scheduled for later this month carried expectations of rebounds after prior weakness. The data flow left second-half growth forecasts finely balanced ahead of the next Bank of Canada decision.

Commodity and external impulse WTI crude advanced and Brent crude gained, providing support to energy equities even as broader TSX performance reflected mixed financial-sector moves. USD/CAD closed the week higher, with the loonie showing limited response to the oil advance amid tariff headlines.

Market pricing and yield moves Canada 10-year yields declined while the 2-year yield held steady, producing a flatter curve consistent with front-end easing bets. S&P/TSX posted a weekly gain driven by energy and materials strength.

Tariff overlay and external risks New US tariffs targeting Canadian exports added downside risks to growth without immediate inflation consequences. The combination of cooling CPI and trade friction left domestic forecasts data-dependent into the coming quarters.

BoC Watch

The softer June CPI print lifted market-implied probabilities of a cut at the next policy decision. BoC OIS curves shifted lower on the front end as the data confirmed decelerating price pressures. No senior Bank speakers altered the data-dependent narrative during the week. Prior labor-market resilience continues to support the Bank’s upgraded second-half growth outlook. Forward guidance remains anchored to incoming inflation and activity prints rather than pre-committed easing.

The Week Ahead

The BoC Market Participants Survey will provide fresh readings on rate expectations and growth forecasts. GDP month-over-month is scheduled with consensus expectations of a modest print after a prior gain. These releases will feed directly into assessments of consumer and business momentum ahead of the next decision. Markets will watch whether the GDP outcome confirms the modest rebound signaled by retail-sales expectations. Any downside surprise would reinforce the shift in BoC OIS pricing toward earlier easing. The data will also clarify how the recent oil impulse interacts with domestic demand.

Risks & Themes

Tariff uncertainty introduces downside growth risks that could accelerate BoC easing even if inflation remains contained. Oil-price volatility could either support the CAD or transmit imported inflation depending on persistence. Markets appear to underprice the interaction between energy-driven financial-conditions tightening and the softer domestic inflation path. An upside inflation surprise in coming quarters would challenge the current OIS tilt toward cuts.

Week in Review

Equity and FX Performance Mexican markets operated through a pronounced data vacuum with no scheduled releases, allowing external factors to dictate direction. The IPC Bolsa advanced on four of five sessions, closing the week higher after a 0.39% net gain, supported by selective buying in nearshoring-exposed sectors. USD/MXN traded in a narrow band and finished 0.33% lower, reflecting balanced flows rather than domestic catalysts. EUR/MXN declined 0.55% over the same period. The yield curve steepened as longer-term rates moved higher while short-term rates held steady, signaling investor caution on fiscal dynamics.

Commodity Tailwinds Global oil prices provided the dominant impulse, with WTI crude surging 7.31% and Brent crude climbing 8.47% on supply concerns. These gains reinforced Mexico’s external accounts and offered limited support to energy-linked peso revenues. Silver advanced 3.70% and gold rose 1.51%, adding further lift to mining components within the IPC Bolsa. The commodity move offset the absence of fresh inflation or activity prints and kept positioning light ahead of the next data cluster.

Policy and Sentiment Anchors Remittance inflows continued to underpin household consumption and peso stability. Nearshoring momentum persisted through new auto-supplier investments in northern states despite tariff uncertainty. USMCA-related statements from Washington generated modest trade-hope rallies mid-week, though no concrete interim arrangements emerged. The data configuration left Banxico forward guidance unchanged.

Banxico Watch

Banco de Mexico left the policy rate unchanged with no speakers or minutes released during the week. The latest CPI print continued to moderate, reinforcing the case for a measured adjustment path at upcoming decisions. Banxico OIS pricing showed only limited shifts, keeping the first cut discounted well beyond the next meeting. The oil-driven tightening in financial conditions offset any residual easing pressure from softer domestic prints, leaving the curve anchored for data dependence. The wide short-to-long rate differential continues to signal inflation expectations above the target band into coming quarters.

The Week Ahead

Trade Balance data on Monday will provide the first read on external accounts after the oil surge, with focus on whether energy revenues widen the surplus further. The release matters for peso valuation and will feed directly into Banxico’s assessment of the current account at the next meeting. GDP Growth Quarter-over-Quarter Preliminary and GDP Growth Year-over-Year Preliminary on Thursday will offer the initial look at second-half momentum. Markets will watch whether the prints confirm resilience or highlight downside risks from global trade frictions. Any surprise in the GDP figures could shift Banxico OIS pricing ahead of upcoming decisions by altering the growth-inflation trade-off. The data cluster arrives against a backdrop of USMCA consultations and potential tariff developments that could influence nearshoring flows in coming quarters.

Risks & Themes

The week’s oil surge has tightened financial conditions through the commodity channel, raising the possibility that Banxico maintains the current rate longer than markets currently price if external balances strengthen. Upside risks center on sustained nearshoring FDI and remittance support that could keep the peso range-bound even as US tariff threats on steel and aluminum imports create headline volatility. Downside scenarios include a sharper-than-expected GDP contraction that reopens easing bets at the next meeting. Markets appear to underprice the interaction between elevated oil prices and USMCA implementation risks, leaving Banxico OIS curves vulnerable to repricing once the preliminary GDP prints arrive.

Week in Review

Tariff Shock Meets Fiscal Offset The US decision to impose tariffs on Brazilian imports, targeting the PIX system and affecting annual exports, dominated market attention from Monday onward. The government responded with extraordinary rural credit to cushion agricultural exporters, a move that supported the real even as President Lula pledged a “war of truth” on trade distortions. May activity data showed expansion in the GDP monitor, beating earlier forecasts and providing a modest counter to the external threat.

Commodity Strength Anchors Markets WTI crude advanced over the week, driving Petrobras higher and Vale up. The Bovespa index rose before closing the period at 174042, while USD/BRL fell to 5.08. Record tourism inflows and spending added further support to the external accounts.

Growth Momentum Shows Early Signs of Cooling May data confirmed the economy continued to expand but at a decelerating pace, with manufacturing rankings slipping further and Chinese beef demand weakening. Oil royalties delivered substantial revenue to federal and state coffers in the first half, offering fiscal breathing room yet underscoring commodity dependence. The absence of fresh inflation prints left the latest CPI reading as the benchmark, with no scheduled releases until the upcoming unemployment print.

Policy and External Balances Hold Steady Brazil’s short-term rate remained unchanged throughout the week with no BCB communication. Dividend distributions by Brazilian firms illustrated corporate resilience. The combination of targeted credit support and commodity gains kept the BRL on a firmer footing despite the tariff announcement.

BCB Watch

The absence of any Banco Central do Brasil speakers, minutes, or decisions this week left the Selic path anchored to the latest CPI reading and the short-term rate. The data flow showed activity resilience in May alongside external tariff pressure, which the BCB is likely to view as a growth downside risk rather than an immediate inflation impulse. BCB OIS curves showed no material repricing, consistent with markets maintaining a steady outlook for the next meeting. The rural credit package adds a modest fiscal offset that could limit any near-term dovish shift, while the upcoming unemployment release will provide the first fresh labor-market signal since the prior easing cycle. Overall, the week reinforced a data-dependent stance with limited near-term adjustment priced into OIS.

The Week Ahead

The calendar highlights the Headline Unemployment Rate release on Thursday at 08:00, the only medium-impact Brazilian data point next week. Markets will watch for any deviation from the prior print to gauge whether labor-market softening supports additional easing at the next meeting. No COPOM events or speaker appearances are scheduled, so attention will remain on external drivers including iron-ore and oil price action that influence BRL flows and the trade balance. The unemployment outcome will feed directly into assessments of domestic demand strength ahead of upcoming decisions, particularly given the May activity slowdown already visible in the GDP monitor. Commodity volatility tied to global energy prices will continue to shape BCB OIS pricing, with any sustained oil strength likely viewed as a risk to the inflation trajectory in coming quarters. Overall, the week offers limited domestic data but high sensitivity to labor-market and external signals that could shift the rate path.

Risks & Themes

The tariff announcement introduces a clear downside risk to export margins and growth, partially mitigated by the rural credit package but still capable of weighing on 2H activity if retaliation escalates. Sustained WTI strength could re-anchor inflation expectations higher, challenging the BCB’s ability to ease further even as activity data cool. Markets appear to be under-pricing the interaction between external trade frictions and domestic demand softening, with BCB OIS curves showing only modest adjustment. Upside scenarios center on continued commodity support lifting the BRL and equities, while downside cases involve broader US tariff expansion or renewed oil-driven pipeline pressures. The data this week tilt the balance toward greater caution on the growth outlook without yet altering the core rate trajectory.

Week in Review

Rating upgrade anchors sentiment. Markets responded to Moody’s move from Caa1 to B3 with positive outlook by lifting equities mid-week before later consolidation. The upgrade aligned all three major agencies for the first time in a decade and coincided with improved bond auction demand.

May contraction highlights uneven recovery. Economic activity contracted for a second consecutive month, yet export-tax collections rose in real terms and supported primary surplus targets. Net international reserves faced seasonal energy payment pressure while soybean prices advanced.

Disinflation trend persists. Recent CPI data extended the multi-month moderation path that began earlier in the year and opened scope for measured policy adjustments. The print aligned with fiscal tightening measures that narrowed external financing gaps.

Peso managed crawl holds. The currency moved modestly wider over the week with limited intervention. Thin volumes reflected positioning ahead of reserve updates rather than outright depreciation pressure.

Commodity tailwinds offset volatility. Energy price movements supported revenues, while soybean gains aided farm margins and export registrations. Gold prices rose mid-week before settling lower.

Fiscal and multilateral buffers strengthen. New syndicated loan facilities and extension of industrial export-tax rebates reinforced external buffers and primary surplus trajectory. Treasury operations targeted longer-maturity placements following the rating signal.

Equity outperformance concentrated. Bank and energy names drove selective equity gains amid carry-trade positioning, with limited spillover from other risk assets. Broader risk appetite improved after the rating announcement.

Data dependence shapes near-term path. Absence of major releases left focus on reserve flows and IMF review progress, with the week’s arc confirming resilience in external accounts despite domestic output softness.

BCRA Watch

The Central Bank maintained its managed crawl without fresh signals, allowing the currency to close modestly wider after limited weekly movement. Recent CPI data reinforced the disinflation trajectory that supports measured easing room while preserving fiscal anchors. No speaker comments or minutes altered forward guidance, leaving OIS curves priced for gradual adjustments aligned with primary surplus targets. Commodity price strength aided reserve accumulation prospects, offsetting contraction effects. Market pricing showed limited near-term repricing, consistent with data-dependent tolerance for energy-driven inflation impulses.

The Week Ahead

Attention turns to reserve and monetary-aggregate updates that will clarify intervention flows ahead of the next meeting. Soybean export registrations and Vaca Muerta project developments remain key for trade balance and reserve support. Treasury bond auctions will test demand following recent placements. Global commodity moves will influence revenues and inflation expectations relevant to the rate path. IMF programme review commentary could affect disbursement timing and external buffer dynamics. No high-impact domestic releases are scheduled, keeping focus on fiscal consolidation metrics and export-tax collections. OIS curves will absorb any shifts in growth outlook from upcoming activity prints that inform coming quarters’ policy stance.

Risks & Themes

The rating upgrade reduces near-term refinancing risks but leaves the outlook sensitive to sustained primary surplus delivery amid contraction signals. Upside scenario centers on continued commodity strength narrowing external gaps faster than priced, supporting earlier reserve accumulation. Downside risks include renewed energy price volatility that could pressure CPI moderation and delay easing. Markets appear to underprice the interaction between global energy impulses and domestic fiscal anchors, with OIS curves showing only limited adjustment despite the rating alignment. Sustained capital inflows post-upgrade could ease currency liquidity pressures, yet thin volumes highlight vulnerability to positioning reversals.

Week in Review

Commodity Price Swings Drive Regional Asset Performance No macroeconomic releases occurred across Colombia, Chile and Peru, leaving price action anchored in external commodity flows. Copper rose to close the week higher, supporting mining revenues in Chile and Peru. MSCI Peru advanced while MSCI Chile declined, reflecting mixed equity performance after earlier mining gains.

Currency Moves Track Commodity and USD Flows USD/COP strengthened as the peso outperformed, whereas USD/CLP and USD/PEN weakened. Gold gained, offering marginal support to Peru producers, while Brent crude volatility produced neutral-to-negative effects on Colombia’s oil-linked fiscal accounts.

Equity and External Balance Divergence Persists MSCI Colombia remained unchanged amid thin local catalysts. Chile’s plan to attract mining investment continued to draw attention despite weak Chinese spot premiums. Peru’s trade surplus widened on higher copper volumes, narrowing current-account gaps, while Colombia faced continued downside risk to fiscal projections from Brent swings. Commodity strength offset the absence of domestic prints and kept external balances in focus.

Andean Central Banks Watch

BanRep, BCCh and BCRP held policy rates unchanged with no speaker events or minutes released. Forward guidance remained data-dependent amid the oil and copper impulse, with no shifts observed in BanRep/BCCh/BCRP OIS curves. The absence of inflation or activity prints left market pricing anchored to external commodity channels rather than domestic surprises. Elevated copper levels continue to support Chile and Peru fiscal outlooks, while Brent volatility keeps Colombia’s external financing needs in view for upcoming decisions. No OIS repricing toward near-term easing or tightening was evident in the quiet week.

The Week Ahead

The calendar shows no scheduled releases for Colombia, Chile or Peru through the next week, extending the data-light period. Attention will center on copper and Brent follow-through for signals on mining royalties and oil revenues ahead of the next BanRep, BCCh and BCRP meetings. Further copper gains would widen Peru’s trade surplus and improve Chile’s fiscal inflows. Brent stability would leave Colombia’s current-account effects neutral while USD/COP tracks broader dollar moves. Investors will monitor global commodity flows for any spillover into BanRep/BCCh/BCRP OIS pricing and rate-path expectations over coming quarters. Chile’s tax-cut and deregulation bill progress could surface as a secondary domestic driver if fiscal reset talks with multilateral partners advance.

Risks & Themes

Copper’s weekly gain shifts the near-term outlook toward firmer external balances for Chile and Peru, yet any reversal would pressure mining equities and royalty receipts. Brent’s weekly advance widens Colombia’s external financing gap and reduces Ecopetrol dividend expectations, an upside risk scenario the market appears to underprice. Thin liquidity in USD/PEN leaves room for sharp corrections that could feed into BCRP policy considerations. Markets continue to price the commodity impulse directly into curves while underweighting potential fiscal slippage in Colombia should oil prices retreat.

Week in Review

Labour market shows resilience UK labour data delivered an employment beat while the unemployment rate held steady and average earnings growth slowed modestly. These prints arrived alongside the political transition to Prime Minister Andy Burnham, whose early statements emphasised growth support without immediate fiscal loosening.

Inflation trajectory eases modestly June CPI undershot consensus and extended the prior reading lower. Core inflation remained unchanged while the monthly rate matched expectations. The combination of softer headline inflation and firmer employment reduced near-term BoE easing probabilities, keeping OIS curves anchored for a hold through the summer.

Markets absorb energy impulse Brent crude rose sharply through the week, closing at 96.78. Equity indices responded positively, with the FTSE 100 ending at 64632.69. Gilt yields declined as the inflation beat offset labour strength, while sterling traded at 1.33 against the dollar. The week closed with markets balancing domestic resilience against the global oil-driven tightening.

BoE Watch

No Bank of England speakers appeared this week, leaving the policy message to rest on the data-dependent framework reiterated in prior statements by Governor Bailey. Markets interpreted the CPI print and employment beat as reinforcing the case for holding Bank Rate into the August decision. OIS curves showed only limited repricing for near-term cuts, consistent with the view that above-target inflation reinforced by Brent at 96.78 warrants patience. The absence of fresh forward guidance kept the first easing still discounted no earlier than late 2026. Prior weeks’ hawkish tone from Bailey on persistent price pressures aligned with this week’s mixed labour-inflation outcome. The upcoming Monetary Policy Report will provide the next formal update on the medium-term rate path. Overall, the data flow supports our base case of an unchanged stance through the remainder of summer.

Data Review

June unemployment held steady while employment change surprised to the upside. Average earnings growth printed below forecast, signalling a modest cooling in wage momentum. June CPI came in softer than consensus and below the prior print, with the monthly rate matching expectations. Core CPI remained in line with forecast. These releases together indicate the UK economy sits in a mid-expansion phase where labour demand absorbs higher borrowing costs without rapid deterioration. The inflation undershoot supports a gradual return toward target, yet the employment beat limits the scope for near-term BoE cuts. Pipeline signals from prior weeks, including German wholesale price contraction, reinforce the view that UK disinflation remains on track despite the Brent surge to 96.78. Overall, the data flow points to a Bank Rate path that stays on hold into the autumn, with OIS markets now discounting the first move no earlier than year-end.

The Week Ahead

Monday brings the CBI Distributive Trades survey, offering an early signal on retail momentum. Wednesday features BoE consumer credit, mortgage approvals, and mortgage lending data. Thursday delivers the BoE Interest Rate Decision alongside the Monetary Policy Report and MPC minutes. Governor Bailey is scheduled to speak that day, providing the first public comments since the new government took office. Friday closes the week with Nationwide house prices prints. These releases will shape expectations for the autumn growth and inflation outlook. The sequence matters because mortgage and credit data will test whether the labour resilience seen in June extends into household borrowing. Any dovish tilt in Bailey’s remarks could shift OIS pricing for the first cut.

Risks & Themes

The week’s data shift the outlook toward a more balanced but still cautious stance, with upside risks to growth from the employment surprise offset by downside risks to inflation from the CPI print. Positioning in gilts appears extended after the yield decline, leaving room for reversal if Brent sustains above 96.78. Market mispricing signals remain limited, as OIS curves correctly reflect the hold bias into August. Volatility could rise around the decision and Bailey speech if the Monetary Policy Report upgrades the growth forecast. Flow considerations favour equities after the FTSE 100 move, yet sterling at 1.33 stays vulnerable to any renewed oil-driven tightening. Upside scenario centres on further disinflation allowing an earlier cut; downside centres on energy prices re-anchoring inflation expectations higher.

Cross-Asset

The FTSE 100 closed at 64632.69 after starting the week higher, driven by the CPI undershoot and resilient jobs data. The FTSE 250 advanced 1.11% to 23801.5. UK 10-year gilt yields declined, reflecting a modest rally in fixed income as softer inflation reduced rate-hike fears. GBP/USD traded at 1.33, ending the week lower. Brent crude settled at 96.78, up 8.47% weekly, as supply concerns dominated. Gold advanced to 4070.8, up 1.51% over the period. UK natural gas rose to 2.89.

Global Context

Brent crude strength to 96.78 this week echoed the advance recorded in the prior week, tightening financial conditions across DM economies through the commodity channel. US activity resilience continued to anchor global rate paths, with the first Fed cut still priced no earlier than mid-2027. German wholesale prices contracted further month-over-month, extending the pipeline disinflation signal that supports UK core CPI stability. Chinese Q2 GDP weakness from earlier in July underscored persistent demand shortfalls that limit export spillovers to the UK. The common thread across developed markets remains data dependence that tolerates the energy impulse to support growth, keeping OIS curves anchored with only limited near-term repricing.

Week in Review

Oil-driven equity and currency divergence Nordic markets traced a clear arc centered on Brent crude strength that lifted energy-exposed assets while leaving Copenhagen under pressure. Oslo Bors advanced 2.77% to 2007.53 as Brent rose 8.47% over the seven days. OMX Stockholm 30 closed 2.09% higher at 3199.62, supported by the same commodity impulse. In contrast, OMX Copenhagen 25 declined 3.39% to 1830.99 on limited domestic offsets and euro-area flows. OMX Helsinki 25 posted a modest 0.32% gain to 6200.36, reflecting Finland’s euro-area transmission rather than local drivers.

NOK outperformance and yield stability The Norwegian krone strengthened consistently, with USD/NOK falling 0.72% to 9.57 and EUR/NOK declining 1.19% to 10.89 as higher oil revenues eased fiscal concerns. Sweden and Norway 10-year yields showed limited reaction to external energy moves. June inflation prints in Sweden and Norway provided the only inflation anchors and confirmed the absence of immediate policy pressure.

Quiet data calendar reinforces external focus No scheduled releases occurred in Sweden, Norway, Denmark or Finland between 20 July and 26 July, leaving price action driven by Brent and global risk sentiment. Daily equity moves remained contained, with Stockholm rising 1.26% on 22 July and Oslo adding 1.58% the same day before partial retracement. The week therefore closed with clear commodity-led bifurcation rather than domestic growth or inflation surprises.

Nordic Central Banks Watch

Riksbank and Norges Bank OIS curves showed no material shift this week as June CPI prints aligned with prior expectations and left rate-path pricing unchanged. Norges Bank speakers offered no new forward guidance, while the Riksbank continued certificate sales without market impact. Danmarks Nationalbank maintained its EUR/DKK peg amid stable cross rates, and Bank of Finland followed ECB signals with no independent deviation. The oil surge lifted NOK without prompting immediate repricing of Norges Bank hikes, keeping the first move still discounted after the next meeting. OIS markets therefore priced continued data dependence into coming quarters rather than near-term adjustments.

The Week Ahead

Finland Business Confidence Index and Consumer Confidence Index on 27 July will provide the first read on sentiment after the oil move and may influence Bank of Finland views on euro-area transmission. Sweden Household Lending Growth Year-over-Year on the same day offers a housing-market update that feeds directly into Riksbank assessments of domestic demand. German Ifo Business Climate on 27 July carries high impact and will shape ECB expectations relevant to both Denmark and Finland. Norway faces no releases until later in the period, leaving Norges Bank focused on Brent levels near 96.78 and their effect on the krone. Markets will watch for any revisions to prior Danish retail sales or Finnish industrial output that could alter the inflation outlook ahead of upcoming decisions. Overall, the light calendar keeps attention on external commodity and euro-area data for rate-path adjustments in coming quarters.

Risks & Themes

The week’s oil rally to 96.78 introduces upside inflation risk for Norway while supporting fiscal revenues, yet markets appear to underprice the potential for Norges Bank to delay easing if Brent remains elevated. Sweden’s low June CPI reduces downside growth concerns but leaves the Riksbank exposed to imported energy costs that could challenge the current easing bias. Copenhagen’s equity decline signals possible Danish retail weakness that Danmarks Nationalbank must monitor through the peg. Broader mispricing centers on the assumption that DM central banks will tolerate sustained energy-driven inflation without shifting OIS curves earlier than currently discounted.

Week in Review

Hungary, Poland and regional curves respond to external drivers. Brent crude’s advance added immediate imported-energy pressure across all five markets, reversing earlier relief and tightening financial conditions through the commodity channel. EUR/HUF declined 0.66% to 360.37 alongside the broader move in regional FX.

Poland demonstrates resilience amid mixed equity flows. The iShares Poland ETF rose 1.16% to 40.92 even as BIST 100 fell 0.9% to 13,943.90 on thin summer volumes and profit-taking.

Turkey maintains stance as regional sentiment indicators soften. USD/TRY edged 0.42% higher to 47.34 while EUR/CZK fell 0.39% to 24.11, underscoring limited spillover from external moves into Czech or Turkish curves.

Regional bonds and FX adjust on policy differentials and thin liquidity. Hungarian and Polish fixed-income markets participated in the broader CEE compression amid thin summer liquidity. The configuration leaves the five economies in a mid-expansion phase where energy prices now interact with selective domestic resilience to keep central banks data-dependent into August.

Emerging Europe Central Banks Watch

NBP and CNB stayed on hold with no speakers shifting guidance, while BNR maintained its steady stance amid euro-convergence progress. Data from the week, particularly the absence of high-impact releases and the Brent-driven inflation impulse, reinforce a divergent rate path where external energy costs interact with domestic resilience to keep policy settings data-dependent.

Data Review

No high-impact releases emerged from the Czech Republic, Hungary, Poland, Romania or Turkey that altered the near-term policy outlook. The Brent surge to 96.78 added pipeline cost pressure that will feed into subsequent inflation prints across import-dependent economies. These outcomes place the region in the mid-expansion phase where domestic demand in Poland remains supportive while external energy prices reinforce a data-dependent rate path for the central banks into the second half of the year, with NBP and CNB likely to stay on hold longer than previously discounted.

The Week Ahead

Attention centers on any updates from central-bank speakers across the region. No major data releases are scheduled from Hungary, Czech Republic, Poland, Romania or Turkey that would shift near-term policy expectations. The ECB deposit rate and Eurozone CPI provide a stable external anchor for regional OIS curves.

Risks & Themes

Brent’s surge to 96.78 shifts the inflation outlook higher for import-dependent economies. Thin summer liquidity amplified daily equity swings. Polish fiscal dynamics remain a medium-term consideration but have not triggered immediate bond-market stress. Upside scenario centers on continued Polish resilience supporting NBP’s hold while downside risks stem from Turkish sentiment deterioration feeding into policy. Market positioning shows limited OIS repricing for near-term easing across the region, suggesting the oil impulse is not yet fully reflected in rate expectations.

Cross-Asset

Equities closed mixed with the iShares Poland ETF advancing 1.16% to 40.92 while BIST 100 declined 0.9% to 13,943.90. EUR/PLN eased 0.46% to 4.32 and EUR/HUF declined 0.66% to 360.37, while EUR/CZK fell 0.39% to 24.11 and USD/TRY rose 0.42% to 47.34. Brent crude posted the standout move, surging 8.47% to 96.78 and directly lifting input costs for all five economies. Gold rose 1.51% to 4,070.80 while Bitcoin edged 0.09% lower. The configuration priced the oil impulse directly into regional curves while CEE FX remained range-bound.

Global Context

Brent crude’s advance to 96.78 over the past seven days re-anchored financial conditions tighter through the commodity channel, offsetting earlier disinflation signals in DM economies. US labor-market resilience and selective Eurozone factory-order gains kept developed-market central banks data-dependent. China’s Q2 GDP miss and persistent domestic-demand weakness added to global growth divergence, supporting export-oriented Polish and Hungarian manufacturers via AI-related demand. The configuration leaves CEEMEA currencies exposed to further oil-driven imported inflation while Polish economic scale provides a relative buffer through EU recovery inflows. Geopolitical tensions and reduced risk appetite weighed on BIST 100, illustrating the cross-border spillover from energy prices into regional equity flows.

Week in Review

Inflation surprise resets expectations. South Africa’s June inflation data exceeded consensus and informed the same-day policy meeting.

Policy decision anchors the rand. The SARB kept the repo rate unchanged despite the upside surprise, prompting an initial daily strengthening in USD/ZAR before later reversal.

Equity resilience amid commodity swings. The JSE Top 40 advanced during the week and closed the full period at 101433.7, supported by platinum gains even as Brent crude rose mid-week before settling lower.

Yield curve signals contained stress. South Africa’s long-term rate eased while the short-term rate held steady, indicating markets viewed the inflation overshoot as transitory rather than requiring immediate tightening.

Rand volatility tracks external flows. USD/ZAR moved higher by the end of the week, with daily changes including a notable weakening that offset earlier gains.

Naspers drag offsets broader gains. The stock fell over the week, weighing on the Top 40 despite resource-sector support from gold.

Data dependence reinforced. The hotter CPI print aligned with prior-week global oil strength, keeping the SARB data-dependent.

Trade positioning ahead of next release. Markets closed the week with limited movement in EUR/ZAR, setting up the 31 July Trade Balance print as the next domestic catalyst after the policy hold.

SARB Watch

The SARB held the repo rate after the CPI print, overriding market pricing that had briefly shifted toward a higher outcome. Forward guidance emphasized vigilance on second-round effects from fuel prices without altering the inflation-targeting framework. SARB OIS curves showed only modest repricing for the next meeting, keeping the first cut discounted well beyond the immediate horizon. The decision reinforced data dependence amid Brent crude levels. OIS pricing now embeds a higher hurdle for easing, consistent with the recent high in annual inflation.

The Week Ahead

The 31 July Trade Balance release will provide the first post-policy read on external balances. The print matters for terms-of-trade assessment and rand stability ahead of the next SARB decision. Markets will watch whether the balance improves, informing growth and inflation spillovers into coming quarters. No other high-impact domestic data are scheduled, leaving the trade figure as the dominant local input. Global commodity moves, particularly Brent, will continue to influence imported inflation risks and SARB OIS curves. The data flow supports a steady rate path unless the balance surprises sharply to the downside. Analysts expect limited near-term repricing in OIS unless the print challenges the post-hold stability narrative.

Risks & Themes

Hotter CPI raises the bar for any near-term easing while leaving the SARB on hold, shifting the balance toward upside inflation risks in coming quarters. Oil moves amplify imported price pressures and could extend the current rate-path pricing if sustained. Downside growth scenarios remain tied to load-shedding and fiscal constraints, yet markets appear to underprice the persistence of inflation. The rand shows vulnerability to any further commodity reversal or external tightening spillovers. Overall, the week’s arc tilts the outlook toward a higher-for-longer stance unless incoming Trade Balance data materially softens the inflation impulse.

Week in Review

New Zealand inflation surprise drives RBNZ repricing. New Zealand Q2 inflation rose more than expected quarter-over-quarter and exceeded the prior reading, which lifted the annual rate and immediately bolstered market expectations for further RBNZ tightening. The NZX 50 closed the week higher. NZD/USD declined overall amid the data and broader risk aversion.

Australian labour market resilience offsets commodity volatility. Australian June employment rose more than expected, with full-time employment adding to the total and the unemployment rate steady, keeping RBA hike probabilities alive at the cash rate. The ASX 200 closed the week lower as BHP advanced on iron-ore support. AUD/USD posted a modest weekly gain despite the US dollar index remaining firm.

Commodity impulse re-anchors regional financial conditions. Brent crude advanced after a strong weekly gain, while gold rose, providing direct support to Australian export revenues. The Australia 10-year yield eased and NZ short-term rates declined, reflecting mixed inflation and growth signals. AUD/NZD climbed as the policy divergence between the RBA and RBNZ widened.

Data dependence remains the dominant theme. The combination of stronger Australian jobs and hotter New Zealand inflation confirmed that both economies continue to absorb higher borrowing costs without immediate contraction, leaving central banks focused on persistent price pressures into the second half.

ANZ Central Banks Watch

The hotter New Zealand Q2 inflation print shifted RBNZ OIS pricing toward a higher probability of an OCR lift at the next meeting, with the policy rate now viewed as less accommodative relative to the annual inflation rate. RBA speakers maintained data dependence after the employment surprise, keeping the cash rate path unchanged in near-term OIS curves while noting that the unemployment rate still supports labour-market resilience. No RBA or RBNZ decisions occurred this week, yet the commodity-driven tightening in financial conditions reinforced forward guidance that both banks will tolerate above-target inflation to support growth. Market-implied probabilities for an RBA hike at the upcoming decision rose modestly, while RBNZ OIS curves priced a steeper path than two weeks earlier.

The Week Ahead

Monday brings RBA Governor Bullock’s speech, which markets will scrutinise for any shift in the rate path following the strong jobs data. Tuesday features Australian inflation prints including the month-over-month rate, year-over-year rate, and RBA trimmed mean measures, all of which will directly inform the next RBA decision. Wednesday includes RBA Hunter’s speech alongside New Zealand ANZ Business Confidence and Australian building permits month-over-month, providing early signals on construction and sentiment that feed into both central banks’ growth outlooks. Thursday delivers Australian PPI quarter-over-quarter, which will update pipeline inflation trends ahead of the RBNZ’s upcoming assessment. These releases matter because they will either confirm or challenge the current OIS pricing that keeps the first RBA and RBNZ adjustments later in the cycle, with any upside surprises likely to extend the hold period at both central banks.

Risks & Themes

The oil surge introduces upside inflation risks that could force both the RBA and RBNZ to tolerate tighter financial conditions for longer, while downside growth risks remain if China demand weakens further and compresses commodity revenues. Markets may be underpricing the persistence of Australian labour-market strength, which could keep RBA hike odds elevated into the next meeting. An upside scenario sees continued Brent strength lifting AUD terms of trade and allowing the RBA to stay on hold, whereas a downside scenario of softer inflation prints next week could reopen easing bets that current OIS curves have largely discounted. The data shift tilts the balance toward greater data dependence, with any consensus misses on Tuesday’s inflation release likely to produce the largest repricing in regional curves.

Week in Review

Equity volatility reflected policy inertia and external commodity pressure. Mainland benchmarks opened the week lower after the PBoC left the LPR unchanged. Hong Kong’s Hang Seng slipped while TAIEX declined, pressured by semiconductor rotation. Yuan stability and FDI stabilization provided modest offsets. USD/CNY eased after the PBoC’s fixing, and year-to-date FDI narrowed its contraction. Commodity surges amplified cross-asset moves. Brent advanced sharply while copper moved higher. Regional divergence widened by week-end. TAIEX recovered for a net gain, Hang Seng finished lower, and Shanghai Composite edged up. No high-impact mainland data prints occurred during the week, leaving markets to price the oil impulse and await further policy signals. HKMA conducted successful bond tenders with strong bid-to-cover ratios, supporting USD/HKD near its recent level. The week therefore closed with clearer evidence that external energy prices are interacting with subdued domestic demand to keep policy on hold.

Greater China Central Banks Watch

PBoC maintained the 1-year and 5-year LPR while conducting overnight reverse repos that injected liquidity. The daily USD/CNY fixing moved modestly, allowing slight spot softening. HKMA completed multiple government-bond tenders with high bid-to-cover ratios and kept the USD/HKD peg stable. No CBC decisions or minutes were released. The CPI print and FDI reading reinforced the case for unchanged policy settings in the near term. Forward guidance remained data-dependent, with no explicit signals on the medium-term rate path. OIS curves therefore continued to price limited easing probability over the coming months. The combination of stable LPR and liquidity operations indicates the PBoC is tolerating the external oil impulse while monitoring domestic demand.

Data Review

China’s June CPI registered a subdued year-over-year reading that preceded the LPR decision and confirmed limited pipeline pressure. Year-to-date FDI narrowed its contraction, indicating some stabilization in inbound flows though still negative. No other high-impact releases occurred in mainland China, Hong Kong or Taiwan during the seven-day window, leaving the data calendar empty of consensus-beat or miss events. The absence of fresh activity indicators reinforced the view that domestic demand remains soft even as export channels absorb higher input costs from Brent’s advance. Malaysia’s trade balance printed a smaller surplus than the prior reading, but this carried limited read-through for Greater China. The CPI outcome aligns with the PBoC’s decision to hold rates, suggesting the medium-term easing path stays conditional on further growth deterioration. Fixed-asset investment and retail-sales trends referenced in prior notes continued to show property-sector drag without new confirmation this week. Overall, the data flow supports a below-consensus growth trajectory that keeps OIS curves anchored for no near-term policy shift.

The Week Ahead

Attention centers on the upcoming release of NBS Manufacturing PMI and Non-Manufacturing PMI. These prints will provide the first post-LPR read on activity momentum and directly influence Politburo meeting expectations later in the month. Taiwan export orders and industrial production figures are also due, offering fresh semiconductor shipment data. PBoC liquidity operations will continue daily, with markets watching for any quarter-end adjustments. HKMA aggregate balance updates and potential Malaysia cross-border access announcements could affect regional flows. No rate decisions are scheduled from PBoC, HKMA or CBC. The PMI outcomes matter because they will test whether recent FDI stabilization is translating into broader demand recovery. Traders will also monitor any State Council commentary on property financing ahead of the weekend.

Risks & Themes

The week’s data absence leaves markets pricing an unchanged policy path even as Brent’s gain tightens financial conditions. Upside scenario centers on stronger-than-expected PMI prints that could lift TAIEX further and support the yuan. Downside risks include renewed property-sector weakness that could widen the FDI contraction again. Positioning shows heavy HKMA tender demand, suggesting duration appetite remains intact despite higher commodity prices. Volatility in daily equity moves exceeded typical ranges on multiple sessions, indicating elevated sensitivity to external catalysts. Flow considerations point to continued semiconductor rotation favoring Taiwan over mainland cyclicals. Market mispricing signals are limited given the empty calendar, but any Politburo growth-commitment language could quickly reprice OIS curves.

Cross-Asset

Equities posted divergent weekly net changes with TAIEX rising while Hang Seng fell and Shanghai Composite gained. Daily moves included a sharp TAIEX advance and a Shanghai decline. Bonds saw strong HKMA tender demand for longer-dated issues, though 10-year yields were not quoted. FX markets featured USD/CNY closing lower on a modest weekly decline and USD/HKD holding steady with a small net rise. Commodities dominated price action as Brent climbed, copper advanced, and gold rose. The Brent surge coincided with equity rotation out of cyclicals. Bitcoin ended the week little changed. Cross-asset pricing therefore reflected the oil impulse passing directly into regional curves and currencies.

Global Context

Brent’s advance interacted with US activity resilience noted in prior weeks to keep global financial conditions tighter. German PPI contracted, extending pipeline disinflation elsewhere while energy prices lifted regional yields. Cross-border spillovers from yuan adoption in Thai trade settlements supported modest USD/CNY stability. Geopolitical risks around EU-China trade discussions remained contained within the seven-day window. The oil impulse continues to shape rate-path expectations across developed markets, limiting near-term easing priced into OIS curves. Trade dynamics showed Malaysia’s surplus narrowing sharply, with limited immediate read-through for Greater China supply chains.

Week in Review

Equity Market Volatility Dominates Early Sessions Markets opened the week with sharp losses as KOSPI declined notably on Monday and Tuesday, led by Samsung and SK Hynix amid AI-memory rotation and foreign selling. KRX activated sell-side sidecars on both sessions while long-term bond yields moved higher. The selloff coincided with authorities’ announcement of a won internationalization roadmap that permits offshore trading and 24/7 settlement to support future MSCI inclusion.

GDP Beat Provides Clear Through-Line Wednesday’s KOSPI rebound priced in the Thursday advance GDP release, which delivered stronger-than-expected quarter-over-quarter growth. The outperformance was tied to semiconductor exports, pushing Samsung and SK Hynix shares higher on the day. The beat reversed earlier expectations of a sharper slowdown from the prior quarter’s pace and confirmed export resilience even as domestic demand remained soft.

Won Strengthens on Inflows and Policy Signals USD/KRW closed 1.88% lower for the week at 1,459.42 after touching higher levels mid-week, supported by foreign equity purchases and the GDP surprise. Bank of Korea warnings on NDF-driven volatility were offset by sustained capital inflows. Brent crude’s 8.47% advance to 96.78 added cost pressure but did not derail the won’s recovery from its recent real-value low.

Friday Reversal Highlights Fragile Sentiment KOSPI dropped on Friday despite the GDP beat, with Samsung and SK Hynix declining, underscoring that profit-taking and global risk-off flows can quickly override domestic data strength. The weekly net gain of 2.68% nevertheless left equities higher and the won firmer, setting a constructive tone into the next policy window.

BoK Watch

The Q2 GDP beat has shifted BoK OIS pricing toward a higher probability of a rate hike at the next Monetary Policy Committee meeting rather than an easing. Stronger export-led growth and capital inflows have reduced near-term cut expectations, with the 10-year government bond yield holding higher after its daily rise. No BoK speakers appeared this week, but Governor remarks on NDF volatility and the September offshore won settlement pilot signal continued focus on exchange-rate stability. The data flow reinforces the Bank’s data-dependent stance, with the growth surprise challenging earlier assumptions of a rapid deceleration that would have justified earlier easing. OIS curves now embed firmer policy rates through the remainder of 2026.

The Week Ahead

Consumer Confidence Index data on Monday will provide the first read on household sentiment following the GDP beat and will influence views on consumption momentum into the next Monetary Policy Committee meeting. Business Confidence Index on Wednesday offers a parallel signal on corporate hiring and investment plans, which remain critical for assessing whether export strength can broaden beyond semiconductors. Exports Year-over-Year figures due Saturday will update the trade channel that drove the Q2 outperformance and will feed directly into Bank of Korea assessments of external demand resilience. Markets will watch whether these releases alter BoK OIS pricing for upcoming decisions, particularly if consumer or business readings disappoint and highlight the “growth without jobs” divergence noted in recent commentary. Stronger-than-expected prints would further support the case for holding or tightening policy to anchor inflation expectations amid elevated Brent levels. The absence of high-impact central-bank events leaves the data flow as the dominant driver of rate-path repricing.

Risks & Themes

The GDP beat has narrowed the gap between market pricing and the Bank of Korea’s likely hold-or-hike path, yet the sharp Friday equity reversal shows sentiment remains vulnerable to global risk-off moves and oil-driven cost pressures. Upside scenarios center on sustained semiconductor demand extending the export cycle and supporting further won appreciation. Downside risks include a sharper labor-market divergence if chip profits fail to translate into broad employment gains, potentially forcing the Bank of Korea to tolerate higher inflation to avoid stifling growth. Markets appear to underprice the interaction between Brent at 96.78 and imported inflation, which could keep long-term yields elevated and limit the scope for any near-term policy easing even if domestic demand softens.

Week in Review

BI Policy Surprise Bank Indonesia kept the policy rate unchanged after markets had priced a hike, triggering an initial USD/IDR rise before intervention stabilized the rate at 17,968 by week-end. The decision followed contained inflation readings and moderated capital outflows, with JCI falling 0.57% to 6,196.43 after earlier gains.

Malaysia Growth Outperformance Malaysia’s exports rose 45.4% year-over-year on strong external demand, with the trade balance at MYR 14.9 billion. The data supported views that BNM can remain on hold. The ringgit ended little changed at 4.09 versus the dollar after a 0.13% weekly decline.

Oil-Driven External Pressures Brent crude advanced 8.47% to 96.78, lifting USD/THB to 33.66 and widening current-account risks for import-dependent economies. Malaysia’s semiconductor exports rose while Thailand recorded stronger FDI inflows in the first half, led by technology projects.

Regional Equity and Currency Divergence Singapore’s STI rose 1.63% to 5,588.34 amid limited domestic data, while the Philippines’ PSEi advanced on remittance and commodity flows. USD/PHP rose 0.37% to 61.82 and USD/SGD eased 0.12% to 1.29, reflecting steady NEER management.

Vietnam and Philippines Stability Vietnam’s banking sector growth and FDI momentum provided a positive backdrop, with no major data releases altering policy expectations. Philippine equities outperformed on positive sentiment while USD/PHP volatility remained contained.

ASEAN Central Banks Watch

Bank Indonesia’s hold was interpreted as keeping further hikes on the table if rupiah pressure resumes. Markets had priced a move that failed to materialize, shifting BI/MAS OIS curves modestly lower on near-term easing odds while forward guidance emphasized currency stability. BNM remains on hold after the export data, with oil-driven inflation risks now the key variable. MAS is expected to maintain its current SGD NEER policy band, with no shift signaled. BoT and BSP face limited domestic data, leaving external oil and US developments as the dominant influences on OIS pricing. SBV continues to monitor credit growth in the FDI-heavy north without any change in forward guidance.

The Week Ahead

Singapore’s Monetary Policy Statement will set the tone for MAS SGD NEER band management. No high-impact releases are scheduled for Indonesia, Thailand, Malaysia, Philippines or Vietnam through mid-week, leaving external risk factors such as Brent crude and US data as the primary drivers. Thailand’s discussions on gold trading limits and a savings scheme may influence baht volatility. Malaysia’s foreign reserves and semiconductor export momentum will remain in focus for BNM assessments. Vietnam’s FDI disbursement figures will offer color on supply-chain trends. BSP will watch remittance flows and equity performance for shifts in the inflation outlook. Traders will monitor USD/IDR and USD/THB for signs of capital-flow pressure. Overall, data dependence across the six central banks keeps OIS curves anchored to external commodity and growth prints.

Risks & Themes

The oil surge to 96.78 re-anchors financial conditions tighter through the import-cost channel, raising downside risks to current-account balances in Thailand, Indonesia and the Philippines if Brent sustains elevated levels. BI’s hold reduces the probability of near-term easing but leaves the rupiah exposed to any reversal in inflows. Malaysia’s export outperformance may prove transitory if momentum fades, potentially reopening tightening discussions. Market pricing for MAS and BSP shows limited adjustment to the oil impulse, suggesting possible underestimation of second-round inflation effects. Upside scenarios center on continued Thailand FDI strength and semiconductor export gains that could support regional equities. The dominant mispricing risk lies in assuming central banks will tolerate sustained energy-driven inflation without intervention.

Week in Review

Oil surge dominates price action. Brent crude posted the largest weekly gain in the data set and drove market moves. Equities declined across multiple sessions. The rupee traded near record lows before the RBI intervened.

Domestic resilience messages persist. RBI bulletins stressed continued activity momentum through June and a revival in FDI and FPI inflows. The Finance Ministry noted GDP expansion above 7% for three consecutive years. No high-frequency data prints occurred during the week.

Market positioning reflects external shock absorption. India VIX remained contained despite persistent FII outflows. Gold provided a partial hedge against the energy impulse.

Through-line remains data dependence. The absence of consensus misses on domestic prints left the narrative centered on imported inflation risks from the oil channel. Markets priced limited near-term RBI easing.

RBI Watch

The RBI maintained the policy rate and used spot intervention to cap USD/INR after the currency tested higher levels. Bulletins reiterated June activity resilience and foreign inflow revival, with no change in forward guidance on the rate path. OIS curves showed only modest repricing for the next meeting, reflecting the central bank’s tolerance for the oil-driven inflation impulse. Services exports and remittances were highlighted as external stabilizers amid West Asia tensions. FX sales underscored the RBI’s willingness to deploy reserves to smooth volatility without altering the broader policy stance.

The Week Ahead

Industrial Production Year-over-Year and Manufacturing Production Year-over-Year print on July 28, providing the first post-June activity gauge after the RBI’s positive bulletin. Any downside surprise would reinforce expectations for measured RBI liquidity support. The releases will feed directly into assessments of the growth trajectory ahead of the next policy decision. Markets will also monitor oil price follow-through and any additional rupee intervention signals. Foreign portfolio flows and positioning in USD/INR will dictate near-term moves in both equities and the currency. The combination of IP outcomes and global energy dynamics will set the tone for rate path expectations into coming quarters.

Risks & Themes

The oil surge has shifted the near-term inflation outlook higher through the import channel, with limited market pricing for RBI easing despite the equity sell-off. Upside risks center on sustained domestic momentum and potential FDI recovery supporting the current account, while downside scenarios hinge on further Brent spikes testing RBI tolerance. The market appears to underprice the persistence of the energy impulse given global cycle data, leaving OIS curves anchored but vulnerable to any July activity disappointment. Kharif sowing trends and rural demand will provide additional signals on whether structural resilience can offset external pressures into the second half of the year.

Week in Review

Oil impulse dominates local conditions. Brent crude advanced 8.47% to 96.78, the largest weekly gain in the period, reversing earlier relief and lifting imported energy costs for Turkey. This move occurred alongside a 2.12% drop in the BIST 100 to 76059.77 and a modest 0.28% rise in USD/TRY to 96.55, tightening domestic financial conditions through the commodity channel. Policy expectations shift higher. Rising oil prices are forcing the Central Bank of the Republic of Turkey to maintain effective borrowing rates higher for longer. Labor and external balances in focus. The upcoming Headline Unemployment Rate and Balance of Trade Final releases underscore persistent external pressures. The data therefore suggest that above-target inflation risks, now reinforced by energy prices, will keep the CBRT on hold into the next meeting. Cross-asset pricing reflects resilience. EUR/TRY rose 0.42% to 47.34 while Gold (TRY) declined 0.54% to 63.08, consistent with local currency depreciation pressures amid global DM resilience. The narrative arc shows the mid-expansion global cycle transmitting tighter conditions to Turkey primarily via commodities rather than outright growth contraction.

CBRT Watch

The Central Bank of the Republic of Turkey faced a clear repricing of rate-path expectations after Brent crude’s 8.47% advance to 96.78 removed the basis for near-term easing. Forward guidance and speaker commentary aligned with a hold at the upcoming decision, citing the need to tolerate the energy impulse to support growth. CBRT OIS pricing shifted higher, with markets now discounting the first cut no earlier than after the next meeting rather than in the immediate quarter. The prior week’s global OIS stability was mirrored locally, as data dependence remained the dominant theme. This week’s oil-driven tightening therefore extends the period of elevated effective borrowing rates into coming quarters.

The Week Ahead

The Headline Unemployment Rate release on July 30 will test labor-market resilience, informing whether domestic demand continues to absorb higher borrowing costs. The Balance of Trade Final on July 31 highlights external balance risks that feed directly into inflation and CBRT policy. These prints matter for the rate path because they will shape the data-dependent assessment ahead of the next meeting. Markets will watch for any confirmation that energy prices are lifting pipeline pressures, which could delay cuts further. OIS curves already embed limited near-term easing, and a softer trade outcome could reinforce that pricing. No other high-impact Turkish releases appear in the immediate window, keeping focus on these two data points for growth and inflation signals. The releases will help calibrate whether the oil impulse is transitory or requires additional policy adjustment in coming quarters.

Risks & Themes

Upside risks center on a sharper oil correction that could reopen the door to earlier CBRT easing. Downside risks include further escalation in energy prices that would widen the trade deficit and keep the policy rate on hold longer than markets currently price. The data shift this week tilts the outlook toward tighter financial conditions, with BIST 100’s 2.12% decline already reflecting that adjustment. Market mispricing appears in the limited OIS movement relative to the scale of the Brent advance, suggesting the CBRT’s tolerance for above-target inflation may be under-appreciated. The broader global cycle’s mid-expansion phase continues to transmit commodity volatility into Turkey’s rate path.

Week in Review

Oil-driven fiscal support amid geopolitical flare-up Brent crude rose 8.47% to 96.78, directly lifting fiscal revenue expectations for Saudi Arabia and the UAE. The move followed Iran halting tankers in the Strait of Hormuz and Houthi declarations of a maritime blockade on Saudi ports, with WTI crude rising in tandem to 89.31.

Equity divergence and non-oil resilience MSCI Saudi posted a 0.6% weekly gain to 37.07 while MSCI UAE edged 0.48% higher to 18.86, yet Aramco shares declined 0.89% to 26.6 over the five-day period. Non-oil activity indicators remained firm.

Peg stability and safe-haven flows USD/SAR closed the week at 3.75 while USD/AED stayed at 3.67, underscoring continued currency peg adherence. Gold advanced 1.51% to 4070.8 as investors sought protection amid elevated sovereign CDS spreads.

Limited data flow reinforces external focus No major GCC statistical releases occurred between July 20 and July 26, leaving markets to price the oil impulse directly into fiscal and external balance projections. The data therefore suggest that above-target energy prices will continue to shape GCC fiscal outlooks into the second half of 2026 even as non-oil diversification metrics hold steady.

GCC Central Banks Watch

GCC Central Banks left policy rates unchanged through the week with no speakers or minutes altering forward guidance. The oil-driven tightening in financial conditions offset any near-term easing signals, keeping GCC CBs OIS curves anchored with the first adjustment still discounted no earlier than mid-2027. OIS pricing showed only limited repricing despite Brent strength, consistent with data-dependent frameworks that tolerate the energy impulse to support growth. Peg stability across USD/SAR at 3.75 and USD/AED at 3.67 reinforced the monetary policy transmission mechanism without deviation.

The Week Ahead

Saudi Arabia’s GDP Growth Year-over-Year Preliminary release on July 30 will provide the first read on second-half momentum and directly inform upcoming central bank decisions. Consensus expectations centre on continued expansion supported by the recent oil price level near 96.78, with any beat reinforcing the case for holding rates through the next meeting. UAE non-oil trade and Saudi FDI inflow data scheduled mid-week will further shape views on diversification progress ahead of coming quarters. Markets will monitor OPEC+ statements for any production flexibility signals that could influence the rate path. OIS curves are expected to remain data-dependent, with limited near-term shifts priced unless the GDP print deviates from prior readings. Regional authorities will also track Houthi enforcement actions and tanker transit clarity through the Strait of Hormuz for any additional supply-risk premia. The configuration leaves GCC Central Banks positioned to tolerate the energy impulse while awaiting confirmation that growth remains anchored.

Risks & Themes

Upside risks centre on sustained Brent levels above 96 supporting fiscal balances and allowing GCC Central Banks to maintain current rate paths without external pressure. Downside scenarios include further Iranian tanker stops or Houthi enforcement that could widen Red Sea disruptions and lift sovereign CDS spreads. Markets appear to be underpricing the persistence of supply-risk premia given the 8.47% weekly oil gain, with OIS curves showing only modest adjustments. Equity divergence between MSCI Saudi gains and Aramco declines signals that non-oil sectors may absorb volatility better than pure energy names if tensions ease. The data therefore suggest that any de-escalation in Hormuz transit would remove the dominant driver of the week’s arc while leaving the broader mid-expansion intact.